JGB futures edge up as investors hunt bargains
TOKYO, April 2 (Reuters) - Japanese government bond futures inched higher on Wednesday as investor bargain-hunting offset the negative impact from a jump in Tokyo share prices and the previous day's slide in U.S. Treasuries.
JGB futures had fallen by as much as 0.35 point and the 10-year yield briefly climbed to a one-month high before JGBs trimmed losses due to investor buying of cash bonds, market players said.
Investors are likely to continue to look for opportunities to buy JGBs on dips, given worries about Japan's economic outlook, analysts said.
"The market had not seen levels of around 1.350 percent to 1.400 percent for a while," said Naomi Hasegawa, senior fixed income strategist for Mitsubishi UFJ Securities, referring to the benchmark 10-year yield.
Such levels are likely to attract buying in the near-term, since investors doubt that the Bank of Japan will raise interest rates anytime soon, analysts said.
Such market expectations had been reinforced on Tuesday by the Bank of Japan's tankan survey, which showed that business sentiment fell to a four-year low and that big firms planned to cut capital spending 1.6 percent in the business year to next March. [ID:nT32965]
June JGB futures rose 0.03 point to 139.83 2JGBv1, having pulled up from the day's low of 139.45.
The benchmark 10-year JGB yield rose 0.5 basis point to 1.360 percent JP10YTN=JBTC. The 10-year yield hit a one-month high of 1.370 percent earlier in the session. Lehman Brothers Holdings Inc LEH.N raised $4 billion of capital on Tuesday in a preferred stock deal designed to stop questions about the Wall Street investment bank's stability. [ID:nN01215030]
Lehman's share offer helped to allay fears about the financial sector, lifting U.S. stocks more than 3 percent and sending Treasuries tumbling.
JGBs had skidded lower on Tuesday as domestic investors sold bonds to lock in profits at the start of a new fiscal year in Japan and also due to poor results of a 10-year bond auction.
But underlying economic and market conditions are supportive for JGBs, analysts said.
"The supply and demand balance for JGBs remains tight," said Tatsuo Ichikawa, fixed-income strategist at ABN AMRO Securities.
Investor demand for JGBs is likely to remain robust since the BOJ seems unlikely to raise interest rates for a while from 0.50 percent, Ichikawa said.
In addition, financial institutions may prefer to seek the safety of government debt rather than step up risk-taking or sharply increase bank lending, he said.
(Editing by Brent Kininmont)
